Housing bottleneck will worsen as population growth speeds up

Housing bottleneck will worsen as population growth speeds up

Dublin will need to build at least 200 homes a week

Five years ago, as many wondered whether the green shoots were actually emerging, the Central Statistics Office (CSO) published its population projections for the future. The numbers were based on a detailed analysis of the 2011 Census figures.

When forecasting population, there are three main moving parts: births, deaths and net migration. So to plan ahead, the CSO used scenarios for these factors. For example, they had two fertility scenarios.

The optimistic scenario was that Ireland would maintain its 2010 fertility rate of 2.1, just enough to replace the population. The more pessimistic scenario was that this rate would fall to 1.8 by the mid-2020s and remain there into the 2040s. This would leave Ireland on a par with North European countries, whose fertility rates have actually risen since the 1980s.

The flip-side of the natural increase is death. For mortality rates, there were no scenarios – simply an assumption that life expectancy would increase by seven years for men between 2010 and 2046 (to 85 years) and by almost six years for women (to 88.5).

By far the trickiest element to forecast for Ireland, though, is net migration. Whereas the annual natural increase has been quite steady, net migration jumps around. Ireland’s people are unusually mobile.

Five years ago, the CSO adopted three migration scenarios. In each of the three, Ireland was expected to lose population each year to 2016 – by 19,000 a year in the most optimistic scenario and by 25,000 a year in the most pessimistic. After that, the three scenarios diverged – ranging from a loss of 5,000 persons a year to a gain of 30,000 as the average annual change from the 2020s through to the 2040s.

The net effect of all this was that Ireland’s population in the low-fertility medium-migration scenario would rise from 4.6m in 2011 to 5.6m by 2046. These numbers in turn underpin Eurostat’s bolder predictions of population out to 2080. Eurostat’s central forecast is that Ireland’s population would reach 6.2m by 2080.

Fast forward to 2018 and the latest population projections have been released by the CSO. Ireland’s fertility rate is already at 1.8 and the optimistic scenario now is the pessimistic one from five years ago: that it stays there. The pessimistic scenario, in turn, has been downgraded and plans that fertility will fall to 1.6.

Projections around mortality are largely unchanged – with the expert group behind the report still seeing a 1.5pc improvement in mortality rates each year, as they did five years ago.

But the joker in the pack for Ireland’s population is – as it always has been – net migration. Remember that Ireland was expected to lose 19,000 people in 2016? It gained 16,000 that year instead.

This has led the expert group to go back to the drawing board. Its most optimistic scenario has been bumped up. Instead of having to wait until the 2020s for 30,000 people a year to come here, this happened from 2017. This change may seem small – but it’s an extra 50,000 people by 2021.

The medium and pessimistic scenarios are more radically changed. The medium scenario has been doubled – from net immigration of 5,000 a year to 10,000. And the pessimistic scenario has changed entirely: even in this scenario, Ireland will be a net recipient of people – 5,000 per year.

What is the effect of all these changes? Substantial, it turns out. In the ”baseline” scenario – lower fertility and medium migration – Ireland’s population by 2046 would be 6.1m, not 5.6m.

Think about that. Our economic circumstances have changed so much in the last five years, that the 30-year outlook has gone up by 50pc!

Or to put it another way, Eurostat thought – based on how things looked back in 2011 – that it would take Ireland more than 60 years for its population to go above 6m. Now, that milestone is just 25 years away – or so our best guess goes.

How does this relate to housing? One of the clearest ways I can find to summarise our housing shortage had been that 2080 target. Thinking that far ahead allows people to stop worrying about elections or their own circumstances and focus instead on the bigger picture.

With a population of 6.2m by 2080 – and with something approaching normal levels of urbanisation and household size – Ireland would need to build roughly 1.7 million apartments over six decades. (Its need for family homes is, contrary to popular perception, negligible as almost all population growth will come from households of one to two persons.) Dublin alone would need an apartment block of 200 homes every week for decades. To be clear, by ”apartment block”, I mean urban housing for one to two person households. This includes student accommodation and co-living spaces, core urban high-rise and suburban low-rise for downsizers. It also includes independent and assisted living complexes for Ireland’s older residents. And that is a topic in and of itself – two thirds of Ireland’s 1.5m extra inhabitants will be aged 65 or over.

Amazingly, though, Ireland’s timeline to build 1.7m apartments just got halved. The country is now expected to reach a population of 6.2 million by 2050, not 2080.

And even more amazingly, the expert group restrained themselves when thinking about net migration – due to housing shortages. So if housing weren’t an issue, we would get there faster.

If there were any doubt that housing is now the single biggest bottleneck facing the Irish economy, this week’s CSO report puts that to bed. The country needs to get building – in particular building urban homes for one to two person households. And twice as fast as we thought we needed to.

Ronan Lyons is assistant professor of economics at Trinity College Dublin and author of the Daft.ie Reports.